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Strategies & Market Trends : Value Investing
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To: TimbaBear who wrote (12016)2/14/2001 10:23:13 AM
From: Mark Adams  Read Replies (1) of 78485
 
re Book Value;

I agree with the 'modern' idea that book value understates intellectual assets, including management skill. Goodwill has burned me in the past. For some sectors, mature old economy stocks, book value gets a passing glance. If it's a vulture style investment, I may study the 10k/q to better understand what the true assets and debt structure are.

I usually work from a discounted earnings flow model. Cash on serves as a cushion in some sectors, but I keep in mind things like burn rate, and management choices that can impair cash.

One other thought on book value. In some sectors, ie Oil and Gas, asset write downs have resulted in fine companies with a negative book values. One has to consider if the asset is permanently impaired when looking at such write downs, as it's not common for the assets to be written up when conditions improve. Case in point; CHK
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